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The Crusaders... John Reilly, Saul Klein, Mike Barnett
Best of RealTalk #4 Handling Multiple Offers

Welcome to the “Best of RealTalk”

RealTalk is the premier national online discussion forum (List Serv) for real estate professionals.  The Best of RealTalk is a hand-picked selection of practical tips and commentary from our subscribers who are willing and excited about sharing with other real estate professionals around the world. Over 3000 real estate practitioners subscribe to Realtalk.  For your FREE subscription, send a subscribe message to Realtalk@InternetCrusade.com. The topic this month is marketing.

In this issue of “Best of RealTalk":

  • Handling Multiple Offers

Bill Holt , a Pennsylvania REALTOR®, started us off:

Multiple offers are best left to the Seller to give instruction on handling, after, and I repeat, only after the consequences of disclosure of anything to any parties other than the seller are explained.

If you tell other agents of the existence, some buyers may walk away (depends on the market). Some don't want to compete. You never fully know how the Buyer’s Agent handles things.

The worst case scenario that could (and has) happen is that the seller's agent tells others of the existence of the others, in an effort to get the best offer from the BA's, and they all withdraw and you are the bad person

Our policy is that all agents are encouraged to bring their offers and the seller is educated as to the ramifications and then, and only then, the seller instructs you how to proceed; if it is against your best professional advice and experience, get the seller to authorize you to perform their choice in writing. Then you at least have that to fall back on when things go bad, if they do.

Once you have the multiples, assist the seller in choosing the one to work with first, exhaust or sell it and then move to the next if the first doesn't work out. No one knows you are doing this and you are truly workingfor the seller.

Julie Nelson adds that disclosure to both selling agents is fair to the buyers:

When our office has multiple offers, we inform both selling agents that there is another contract being presented at the same time and invite both buyers to make their best offer. Usually one of the buyers doesn't believe that there really is a second party bidding but at least this way he isn't as furious when the listing agent calls his agent to say: "Sorry but the other party's contract was accepted." He had fair warning. This seems to cause the least problems as far as the losing buyer being upset and it seems to be the best representation for the seller.

Our Manhattan Beach, California REALTOR (Formerly Bucks County, PA REALTOR® and Florida REALTOR®) Ardell Coulter (askardell@hotmail.com) contributes:

I personally, whole heartedly, agree with Bill (Bucks County still does it Better). Setting a policy and removing the seller from the decision of how to handle each individual situation is just inappropriate.

Usually with three or more offers in hand, notice of final and best is used since it will likely produce the best result for the seller, all parties are given equal time and notice, and it is not likely all will get scared and run off.

Scary here in this area where sellers submit multiple counters to several buyers all at the same time. I don't know if I'll ever be able to handle the legalities of that one.

Here's the wording on the "Multiple Counter from Seller" "Seller is making a Counter Offer(s) to another prospective buyer(s) on terms which may or may not be the same as in this Counter Offer. Acceptance of this Counter Offer by Buyer shall NOT be binding unless and until it is subsequently re-signed by Seller in Paragraph 6 below...

Larry Nuese agrees with Ardell:

I have to agree with you. I have always felt that "Shopping" offers was not in the best interests of the Seller. Often it can back fire, and result in other offers not being submitted.

REALTOR® Anna Griffin (http://www.MadCityRealtor.com) points out that the terms of the offers must not be disclosed:

In Wisconsin anyway, it's considered to be in the best interest of the seller to notify selling realtors of the existence of competing offers. We are NOT allowed to give any indication of the terms of any offer ever to anyone until after closing. However, the use of creative wording is common (i.e.: "Don't bother writing an offer unless it's better than full price and doesn't have a sale-of-house contingency...") The idea is always to get the best deal for the seller.

We go to Chris Newell for a “Canadian Perspective:”

I cannot possibly see how it could be in the seller's best interest to inform people of the existence of other offers... I know, I know, then, in theory, all offers will come in at their best. But what about when people walk away from competition? How have you served the seller's best interests? What if all offers walk away? How have you served the seller then?

Same goes for the talk about not bringing in a conditional on sale? I never listen to the listing agent - they are duty-bound to present all offers, and there have been plenty of times when I was told not to bring in conditional on sale, over-list-price, only to win the competition with conditional on sale, under list price. So much depends on the negotiating skills of the two Realtors sitting at the table.

This practice of telling other brokers of the existence of an offer does not serve the sellers! It is yet another of those "But, we've always done it this way" business practices.

Sorry - I know a bunch of you will say I'm wrong, and that is fine.

As someone (Steele?) said on another forum, it is the seller's decision, after they have been informed of the pro's and cons. And if they are my seller, they sign a release of my liability when they give me my written instructions. They ain't gonna sue me over this one.

Ann Cummings (http://www.anncummings.com) notes that listing brokers need to be careful they don’t scare off the buyers:

Very recently, I was involved in a situation where my buyer client made an offer on a property and as soon as I delivered it, we were told that there was another offer being delivered shortly. The seller's agent then called both buyer's agents and told us to have our buyers put forth their best offers, and they would then be considered by the seller. Interestingly enough, both buyers backed off, as neither of them wanted to get involved in a bidding war. The seller's agent ended up with egg on her face, as this was her advice to have her sellers respond this way. They ended up with no offer to consider.

I am aware that this isn't always what happens in this type of situation, however, it really does backfire at times. That particular property is still on the market, and we're in a very heated market, and those sellers had already made an offer on another property. Oh well............

Christine Pardo (http://www.ChrisPardo.com) comments to Ardell about the seller’s counteroffer:

We changed the language years ago to call it a "counter consideration" instead of "counter offer". It also said the seller was free to accept another offer up until and if the buyer came back with an acceptable offer.

This seems to cause the least problems as far as the losing buyer being upset and it seems to be the best representation for the seller.

Is it the best for the seller. What if the second party figures they don't want to get into a bidding war and decide not to offer. the second offer may have been planned to be better than the first! Many buyers in this hot market are trying to avoid bidding wars. Just gets too expensive.

Once you have the multiples, assist the seller in choosing the one to work with first, exhaust or sell it and then move to the next if the first doesn't work out. No one knows you are doing this and you are truly working for the seller.

This gets lots of grief from the buyer's agents and when I have the buyer, I hate it. But, this does seem to do the best for the seller, and that's the point. When working with the buyer, I explain this might happen but most agents in this area tell me there may be or there is an offer up front. Even before I show! Yes, they tell me there is an offer, not contract, when I call to show. And we wonder why people go FSBO! Can you say functionary?

Here's a good one. My buyer made an offer and we lost out on price to another buyer no second chance. That deal fell apart, based on problems with the HOA. The SA called me back a week after we originally lost out and told me it was back on the market. Re-offered at our original offer and got the deal! That was a smart call!

California REALTOR® Theresa Grant(Theresa@HomesInLakeArrowhead.com) advises buyers to come back with their highest and best offers:

CA law states that you must present any and all offers to the seller, up to the date of closing. It is the *seller's* choice if the seller wants to blow out a deal (and risk legal repercussions, if any).

My board has no rules governing the presentation of offers, multiple or otherwise. There is, however, the law. And the Code of Ethics. And all parts in between.

In the case of multiple offers at the same time (which usually happens with my REO clients) the answer I usually end up with is to go back to the buyers, in writing, and state that there are multiple offers. All offers are being countered at the same time. Buyers should come back with their highest and best offer, or state if their original offer is their highest and best. If an agent tells me s/he is bringing in an offer, but it hasn't materialized, I advise the seller that another offer may be coming in (because it may affect how long they take to accept or make a counter offer under terms of the original offer).

And from Bob Pedersen (Bob@BobPedersen.com) raises the possibility of a buyer preparing two offers for presentation:

My experience has been that letting buyers and their agents know of multiple offers usually results in a higher price for the seller. When there have been multiple offers on my listings, it is not unusual for the first offer to have the price scratched out and a higher price written in and initialed by the buyer before the offer is presented.

Other times I have seen the price written in a different color ink than the rest of the purchase agreement--the buyer left the form blank and authorized the agent to fill it in later depending upon whether or not it is going to be a multiple offer situation. On occasion when I have represented the buyer and there is the possibility of multiple offers, I have had the buyer sign two purchase agreements--the first one at what they would like to pay, and then a second one at a higher price to be used if I find out at the last minute that there is more than one buyer. Multiple offers may cause one of the buyers not to pursue the property because of not wanting to get into a bidding war, but it is unlikely that all buyers will walk away.

Doug Ranger (http://www.DougRanger.com) adds to the Thread:

Two years ago, the California Association of Realtors (CAR) published in their monthly magazine, an article covering multiple offers. It covered the necessary precautionary issues that have been previously discussed on this list and went on to say that, "If disclosing other agents' offers will bring a higher price to the Seller, it is perfectly all right to do so." Obviously, some agents have a real problem accepting this as being ethical.

Personally, I have been on both sides (representing Buyers and Sellers, though not in the same transaction) in multiple offer situations and very tactfully quote the CAR article. Agents representing the Seller usually are reluctant to disclose, even when I mention it is ok and why. Likewise, when I have represented the Seller in a multiple offer situation, I've had a Buyer's agent request that I not disclose their client's offer to the other agents. It really is the prerogative of the Listing Agent and the Seller. It certainly is not uncommon to have a sale price higher than the asking price.

The State of Maine and Kentucky developed guidelines as we are told by Cindy Butts, Executive Officer, Maine Association of REALTORS®

The Maine Association of REALTORS developed suggested Multiple Offer Guidelines in 1997 to assist our members in handling multiple offer situations. Due to the heavy volume of multiple offers still happening in Maine (hooray!), we do find that having Guidelines helps because of consumer reaction to the multiple offer experience. Focus of the Guidelines is on communication at all times: prior to, during and after the multiple offer situation.

The Kentucky Association of REALTORS® also developed Multiple Offer Guidelines. Both the Maine and Kentucky Association Guidelines can be obtained via eMail through auto responder. If you would like an eMail copy sent to you, just send a blank eMail to:

MultipleOfferGuidelines-Maine@InternetCrusade.com
MultipleOfferGuidelines-Kentucky@InternetCrusade.com



That’s it for this month. If you have a particular topic you would like discussed or question you would like to see answered, send an eMail to: RealTalk@InternetCrusade.com



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